Cheaper gasoline prices may be just down the road

[May 08, 2010]  NEW YORK (AP) -- Pump prices that typically begin a sprint for their annual highs right about now, might be losing steam well ahead of the summer driving season.

The price of oil fell by more than 10 percent over the past week, as stocks prices dropped and the dollar got stronger. Gasoline futures also fell sharply, a decline that will make its way to the pump price in a matter of weeks.

The average price nationally for a gallon of unleaded regular gasoline Friday was $2.92 a gallon, according to AAA, Wright Express and Oil Price Information Service. That's down almost a penny from Thursday.

A gallon is still running about 78 cents higher today than a year ago, but there are indications that won't last.

"Retail gasoline peaked last year on June 19," said Tom Kloza, chief oil analyst for OPIS. "It is conceivable that Americans next month might pay less than they paid in June 2009 when retail prices topped out at about $2.70 gallon."

Tumbling oil prices can make it more affordable to fill up your tank. A barrel of benchmark crude fell $2 to settle at $75.11 a barrel Friday on the New York Mercantile Exchange. That's the lowest per-barrel price since mid-February.

Crude prices have dropped more than $12 a barrel from an 18-month high on Monday. Plunging stock markets have helped.

A huge drop on the New York Stock Exchange Thursday left traders shaking Friday. The Dow Jones Industrial Average fell about 175 points after losing 348 points Thursday. The market rolled from small gains to losses throughout the day.

Investors fear a European debt crisis, beginning with Greece, where protesters continue to clash with authorities over new austerity measures. That pushed the euro to a 14-month low and strengthened the dollar. Commodities priced in dollars, such as oil, become more expensive for investors holding foreign currencies when the dollar is stronger.

The hundreds of thousands of barrels of oil gushing from a ruptured well in the Gulf of Mexico has done little to prop up prices. This week's government report on oil inventories showed oil stocks in the region grew again, with the Gulf Coast reporting a huge build of 2.52 million barrels.

"Total stocks in the region remain at an 8.5 percent surplus to the 2004-08 (period)," said a report from energy consultancy Cameron Hanover. "The implication here is that the Deepwater Horizon spill is having no tangible impact on imports and even if it does, stock levels can comfortably absorb any knock-on shocks."

Officials are monitoring the spill as it creeps closer to the Louisiana Offshore Oil Port at the mouth of the Mississippi. Tankers unload up to 1.2 million barrels a day of foreign oil to feed half the nation's refinery capacity. Heavy crude could reach the facility next week and force it to close. The Coast Guard would make that call.

Phil Flynn, energy analyst with PFG Best in Chicago, said temporary shutdowns of the port in the past haven't moved gasoline prices much.

"A short-term closure, might support prices for the short term but would not have a lasting impact," he said.

If the port were to close for a longer period, the federal government could order oil drawn from the Strategic Petroleum Reserve, he said.

Flynn said the biggest worry is shipping through the Mississippi's Southwest Pass, where finished gasoline and other fuels move out in small tankers for U.S. ports.

Interruption or delay in those supplies could push gasoline prices up, he said. So far, the pass has remained open though officials are preparing to scrub oily vessels, which could back up ship traffic.

In other Nymex trading in June contracts on Friday, heating oil fell 3.42 cents to settle at $2.0795 a gallon, and gasoline dropped 3.12 cents to settle at $2.1251 a gallon. Natural gas rose 8.6 cents to settle at $4.015 per 1,000 cubic feet.

In London, Brent crude lost $1.56 to settle at $78.27 on the ICE futures exchange.

[Associated Press]

Associated Press writers Pablo Gorondi, Alex Kennedy, Holbrook Mohr and Alan Sayre contributed to this report.

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